• When cost control really isn’t

    In the past, I’ve critiqued Rep. Ryan’s concept of Medicare cost control as so unrealistic it will actually lead to cost increases. My reasoning — and I’m not unique in thinking this way (see Krugman and Cowen, for example) — is that holding Medicare subsidies to private plans to GDP + 1%, which was what the Ryan-Rivlin plan recommended, would never be permitted politically. Beneficiary, provider, and insurance advocacy groups would demand increases, and they’d get them, just as they have in Medicare Advantage.

    Well, if promising increases in voucher levels no greater than GDP + 1% won’t work, will an even lower rate of increase fly? Certainly not, but who is proposing something lower than GDP + 1%? Turns out, Rep. Ryan is. Ezra Klein has the explanation:

    Ryan’s actual budget unexpectedly holds both Medicare and Medicaid to inflation, not to GDP+1%. So let’s say that in 2024, inflation was 2 percent, productivity growth was 2 percent, and health-care costs grew at 6 percent. Under Ryan-Rivlin, Medicare and Medicaid would grow at 5 percent [= GDP + 1%] — a bit less than health-care costs in general, but not that much less. Under Ryan, Medicare and Medicaid would grow at 2 percent [= the inflation rate] — beneficiaries would have to make up the difference.

    Naturally, given what I’ve already said, I agree with Klein that this is totally unrealistic, more unrealistic than any other serious Medicare reform plan I’ve seen, and certainly less realistic than what Congress passed last year.

    We have a health care cost problem in this country. We need to do something serious about it. Proposing something so draconian as to be obviously politically unsustainable may be a conversation starter. But the danger is that it is so divorced from the realm of the possible that the conversation ends rather quickly. Perhaps we should start talking about something that might actually work.


    • “Perhaps we should start talking about something that might actually work.”

      Like payment based on scientific assessment of efficacy.

      Without using that approach, any effort to reduce health care cost inflation is going to end up encouraging flat exclusion of access to many health care services for larger and larger groups of Americans. Competitive bidding, ACO’s, voucher plans, federal options, etc. are all well and good, but without the use of elimination of wasteful ineffective or harmful care the cuts will come closer and closer to the bone. This is unfortunate, since we have so much fat we could trim if we got our act together.

      The problem is that to do that we will have to get people to shut up about death panels, resist the disinformation and lobbying by rent seekers in the health care industry, and inform the public about something that requires paying attention for longer than a Big Mac commercial.

    • I just called my Congressman (a Republican) and he says that the Ryan plan is exactly the same as the plan that all Congresspeople have now so there is nothing to worry about.
      (Yes, they really said that.)